Officials at the ECB are alert to the danger. The ECB’s chief economist Peter Praet says the current inflation level “provides little safety margin against further adverse shocks”, but his view is not shared by the German Bundesbank.

While he did not spell it out, the key worry for central bankers is a debt crisis in Asia as China tries to rein in its $24 trillion lending boom. The Bank of England’s Mark Carney says shadow banking in emerging economies is what now keeps global regulators awake at night.

The eurozone’s service sector inflation fell to a record low of 1pc, though data was distorted by a change in the way that Germany calculates package holidays. Headline consumer price inflation fell to 0.8pc

Mike Amey from the bond fund Pimco said the eurozone is “sleepwalking into a decades-long deflation trap” like the Japanese in the 1990s when they mistook near zero rates for easy money. The region has no margin for error as its ageing crisis takes hold.

While gentle deflation can be benign in low-debt economies, it plays havoc with the debt dynamics of leveraged economies, an effect described by US economist Irving Fisher in his 1933 classic “Debt-deflation Theory of Great Depressions”.

The Brussels think-tank Bruegel said deflation risks pushing Italy and Spain into a “runaway debt trajectory” as the debt stock rises on a shrinking or static nominal base. Each one percentage point fall in inflation forces Italy to increase its primary budget surplus by an extra 1.3pc of GDP to stabilise debt, a Sisyphean task.

Greece, Cyprus, and Latvia are in deflation already. EMU-wide prices have fallen since May when adjusted for austerity taxes, with Italy, France, and Holland all negative, a pattern replicated in Eastern Europe.

A key cause is excess plant China where fixed capital investment topped $4 trillion last year, matching Europe and the US combined. “This is transmitting a deflationary impulse through the global system,” said Julian Callow from Barclays.

The ECB cut rates to 0.25pc in November to head off deflation, causing a storm of protest in Germany. The Bank’s president Mario Draghi has since sought to win back German support, toughening his rhetoric. He told Spiegel that the ECB’s governing council sees “no immediate need” to take further action, suggesting that it will hold tight this week.

Mr Callow said the ECB is taking a risk by remaining passive and hoping that global recovery will lift Europe off the reefs. The region faces imported tightening from the US, as well as “endogenous tapering” at home as banks deleverage. Business lending has fallen by 3.9pc over the last year.

The ECB’s balance sheet has fallen from €3 trillion to under €2.3 trillion over the last year – from 31.8pc to 23.7pc of GDP – as banks repay much of Mr Draghi’s €1 trillion lending blitz. It is a form of monetary tightening.

“The situation cries out for the ECB to boost its balance sheet again. It would normally be a no-brainer to loosen, but with rates at rock-bottom they don’t have many options: QE is too controversial since it means buying government bonds, if it is going to have any effect. The threshold for that is very high,” he said.

Mr Callow said the global expansion dates back to March 2009 and is already long in the tooth by historic standards. The risk is that the cycle could start to turn again before the eurozone has sorted out its problems, with inflation already at deep recession levels and unemployment at 12pc.

The great unknown is what will happen in China, now the epicentre of global risk. Societe Generale said Beijing may be tempted to push down the yuan to cushion the blow as it pops the credit bubble, and to counter devaluation by Japan. This would risk a repeat of the East Asia currency war in 1998, this time on a bigger scale and with the world less able to handle the consequences.

Hedge fund veteran George Soros says China is caught in a contradiction, trying to curb debt while carrying out deep structural reforms. Such reforms can themselves “push economies into a deflationary tailspin” without offsetting stimulus.

“How and when this contradiction will be resolved will have profound consequences for China and the world,” he wrote on Project Syndicate.